We’re not always as smart as we think we are. Homo economicus, the always-rational, theoretical economic being, knows it best.
Homo Economicus doesn’t fall prey to the Texas sharpshooter fallacy like we wishful humans do. The term comes from a joke about a Texan who shoots a bunch of bullets into a barn wall, then paints a target where the most bullet holes are after-the-fact, and calls himself a sharpshooter.
The Texas sharpshooter fallacy happens when we zero-in on similarities in data, while conveniently ignoring the differences in data, which can lead us to the wrong conclusions. While science and data-crunching are great, they can lead to biased interpretations at the hands of our monkey-brains, which are always looking for patterns. The Texas sharpshooter fallacy is a problem everywhere, from politics to statistics.
For instance, if you look at a plot of randomly plotted data points, chances are they won’t be nicely spread out. Some areas will have more data points that others. Yet the data is random...there is no pattern of cause, like our brains want to believe there is. The same thing can happen with data that is not random: we make more of some correlations than is actually rational, based on a subset of the data.
To prevent this from happening, it helps to do things like start out with an actual hypothesis, use legit statistical tests and other methods (think: Bayesian), and avoiding p-hacking, a way to make the data lean a certain way while still passing all the statistical tests.
Related or Semi-related Video
Finance: What are Triple Bottom and Trip...2 Views
Finance allah shmoop what are triple bottom and triple tops
All right well this is a triple top It wants
to break out The stock was trading down here around
five bucks a share in and glam o it went
up And yes blam o is the name of the
company's new anti constipation drug a huge hit So it
went up up up to hear it Fifteen bucks tripled
in value in just a few months but then sober
reality began to hit the investing community There simply wasn't
enough constipation to go around So the stock began to
flag and traded down teo here this level at twelve
bucks But then glam o again released big news a
partnership with manish of its grandma tsa and the american
cheese manufacturing association So the stock raced again to fifteen
But no there just wasn't enough enthusiasm from buyers pay
more than fifteen bucks a share for it So you
know that's all despite this newly created a kind of
market So the stock sank back to twelve only to
then have investment interest from procter and gamble owners of
sharman who bought five percent of the company at thirteen
fifty ish year and left a lot of investors thinking
surveyed by the whole company complete with its product line
of anti constipation drinks Waymo glam Oh thankyou memo But
alas the investment community would not pay up past fifteen
to share and the stock flagged again sinking back to
twelve having created a triple top and needing something to
make things really start you know going So yeah that's
a triple top What about a triple bottom Well a
triple bottom and basically just the same thing in reverse
like this keeps hitting a low point looking like it's
going tio bottom out further But then it recovers on
the subject of bottoming out well glam o is now
available in new chewable gummy form Yeah glam o so
you never have to worry when your bottoms out
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